1st Annual Private Tech Investor Survey

Highlights From SharesPost’s 1st Annual Private Tech Investor Survey

We are pleased to announce the results of SharesPost’s first private tech investor sentiment survey. Over 600
accredited individual and institutional tech investors let us know their expectations for the new year. Survey
participants represented a wide range of private and public market investment styles. Although such surveys
admittedly have a degree of sampling bias, the results were surprisingly consistent. In short, investors of all types
are predominantly bullish about the prospects for tech companies in 2017.

49% of investors surveyed think private company valuations would increase in 2017 (vs. 28% of investors expect
valuations to decrease). This clearly implies a bullish sentiment among investors towards private tech companies,
particularly given the downward valuation correction we witnessed through much of 2016. We note that the bullbear
gap for private tech companies is a bit narrower versus the corresponding gap for public market performance
expectations. Slicing the survey data by investor category, we observed that high net worth investors were
marginally more bullish about the private market’s upside in 2017 than institutional investors.

We asked survey respondents their preference between Public Large Cap Tech, Private Large Cap Tech, Public
Small/Mid-Cap Tech, Private Small/Mid-Cap Tech, and Early/Seed investments. 29% of the surveyed investors
chose Private Small/Mid-Cap Tech followed by 25% of investors believe that Public Small/Mid-Cap Tech
companies would provide best returns over the next 12 months. Interestingly, we observed a greater bias among
institutional investors towards the Small/Mid-Cap asset classes. In other words, 38% of surveyed VC/PE investors
prefer SMID private tech companies and 43% of public equity investors prefer SMID public tech companies.

65% of surveyed investors think that 10 or fewer Unicorns would go public over the next 18 months, implying a runrate
of less than two $1 billion IPOs per quarter. We observed that public equity-focused institutional investors are
marginally more optimistic about the IPO prospects of Unicorns as compared to their VC/PE-focused counterparts.
On a weighted average basis, public equity investors believe that roughly 11 Unicorns would go public over the
next 18 months whereas VC/PE folks estimate 9 such IPOs. Recall that in our earlier report, “Zero to One Billion”,
we illustrated a trendline of “real” Unicorns i.e. $1B+ IPOs or M&As of VC-backed tech companies. There have been
6-8 $1B+ IPOs of VC-backed tech companies every year since 2009. This annual run rate has largely stayed within
this range since the Great Recession, with few peaks (2013 and 2014) and valleys (2016). In short, investors expect
a “reversion to mean” IPO activity over the next 12-18 months, implying an uptick in activity observed in 2016.

We asked participants, “regardless of investment time horizons, where do you see greatest growth opportunity in
the future?” We presented 15 options (as illustrated in exhibit 13), and asked investors for their top three choices.
Regardless of investor groups or cohorts, we noticed Big Data/Analytics, Security (Software), VR/AR, FinTech, and
Wearables (IoT) as the most selected choices whereas Gaming, Ad-Tech, and Clean-Tech as the least selected
choices among all investor groups. We were surprised that almost all cohorts of investors, accredited individual
vs. institutional or public equity vs. VC/PE investors, seem to generally prefer the long-term growth prospects
for Enterprise Software companies above Consumer Mobile or Web Internet companies, particularly given 3 out
of 5 most valuable public companies today are in the latter group (GOOGL, AMZN, FB) versus just one in the first
group (MSFT).

About 37% of all surveyed investors think that investing in late-stage, private tech growth companies via secondary
shares is an attractive investment strategy. This compares to 23% of surveyed respondents who indicated that
secondary shares do not present an attractive investment opportunity. Both private equity and accredited
individual investors think positively about investing in this asset class. But, a marginally higher proportion of public
equity-focused institutional investors are negatively biased towards this asset class. 35% of public equity investors
think that this asset class is not an attractive investment opportunity. This proportion is marginally higher than the
33% of public equity investors who think that secondary share investing is an attractive investment.

57% of investors surveyed believe the S&P 500 would rise by 5% or more over the next 12 months. On the other
hand, 17% of survey respondents believe the S&P 500 would decrease by 5% or more during 2017. Institutional
investors are marginally more bullish about public markets than individual investors. 64% of surveyed institutional
investors are bullish, whereas 53% of accredited individual investors expect public markets to rise 5% or more.
This perspective is consistent with the most recent investor sentiment study conducted by American Association
of Individual Investors (AAII) from December which reported that 43% of respondents felt bullish versus the 28%
feeling bearish.

Survey Methodology

The SharesPost Investor Survey was created to obtain feedback from high net worth accredited individual and
institutional investors on market sentiment and sector-specific expectations for 2017. The online survey was
conducted from November 21 to December 15, 2016. We invited accredited individual investors and institutional
clients of SharesPost to participate. The anonymity of all survey responses has been maintained and online IP
tracking disabled. We received more than 600 completed survey responses. Based on a sample population of
between 1,000,000 to 2,000,000 members, we estimate the margin of error for the survey was below ±5% for a
95% confidence interval.

As a first question, we asked survey respondents to identify themselves as one of the following: Public equity
investor, VC or Private equity investor, Working inside a company, and Other. If survey respondents chose either
“working inside a company” or “other”, we categorized them as an accredited individual investor. We illustrate the
overall breakdown below. Note that unaccredited investors were not invited to participate.

Exhibit 1: Please identify yourself. My day job is …

Source: SharesPost Research; N=600 survey respondents incl. 388 accredited individual investors, 91 public equity & 121 VC/PE investors; Accredited survey respondents who indicated that they work inside a company or run their own business were categorized as “Accredited individual investors”

#1. Bullish prospects for Private Tech company valuations

49% of investors surveyed think private company valuations would increase in 2017 (vs. 28% of investors expect
valuations to decrease). While this implies a generally bullish sentiment among investors towards private
tech companies, we’d highlight that this bull-bear gap for private tech companies is a bit narrower versus the
corresponding gap in the proportion of investors expecting the public markets to rise and fall. Our interpretation?
Overall optimism for public markets is more widespread than the optimism for private tech company investing.
But, the key point here is that more than 70% of the surveyed investors believe that private tech company
valuations would either stay flat or rise over the next 12 months.

In addition, we observed that individual PE investors were marginally more bullish than institutional investors and
public equity investors, respectively. For context, 75% of surveyed accredited individuals believe that private tech
company valuations would stay flat or rise over the next 12 months. This compares to 70%, 68%, 65% levels for VC/
PE investors, Institutional investors, and Public equity institutional investors, respectively.

Exhibit 2: Over the next 12 months, do you expect valuations of Private Technology Growth companies to go up, down, or remain about the same as in recent couple of quarters?

#2. There is a greater enthusiasm for Small/Mid-Cap Tech companies

We asked survey respondents specific questions to gauge their preference for specific sectors. We provided five options to chose among: Public Large Cap Tech, Private Large Cap Tech, Public Small/Mid-Cap Tech, Private Small/Mid-Cap Tech, and Early/Seed investments. 29% of the surveyed investors believe that Private Small/Mid-Cap Tech would provide best returns over the next 12 months followed by 25% of investors that believed Public Small/Mid-Cap Tech companies would do so.

Institutional investors have a marginally greater bias towards SMIDs versus accredited individuals. 58% of surveyed institutional investors think that Small/Mid-Cap private or public tech companies would yield the best returns over the next 12 months. This compares to a tad lower proportion of 54% of accredited individuals who indicated either public or private small/mid-cap tech companies as their top choice to invest over the next 12 months.

65% of surveyed investors think that 10 or fewer Unicorns would go public over the next 18 months, implying a runrate
of less than two $1 billion IPOs per quarter. We observed that public equity-focused institutional investors are
marginally more optimistic about the IPO prospects of Unicorns as compared to their VC/PE-focused counterparts.

Accredited Individuals are more optimistic about Unicorn IPO prospects versus Institutional Investors: 45% of
surveyed accredited individuals think that there would be more than 10 Unicorn IPOs over the next 18 months. On
the other hand, 33% of their institutional counterparts agree with this level of IPO activity. And, the flip side of these
statements is also true. Roughly 67% of surveyed institutional investors believe that there would be 10 or fewer
Unicorn IPOs over the next 18 months.

On average, Institutional investors expect 9 to 11 Unicorn IPOs thru 1H:2018: On a weighted average basis,
public equity investors believe that roughly 11 Unicorns would go public over the next 18 months whereas VC/PE
folks estimate 9 such IPOs. Interestingly, the investors who are closest to these private companies i.e. the VC/PE
investors seem to have the least optimistic view on their IPO prospects over this period.

Exhibit 8: How many Unicorn private companies do you expect to go public over the next 18 months?

We asked all survey takers the following question: “regardless of investment time horizons, where do you see
greatest growth opportunity in the future?” We presented investors with 15+ options and asked them to choose
their top three choices. Regardless of investor groups or cohorts, we noticed Big Data/Analytics, Security
(Software), VR/AR, FinTech, and Wearables (IoT) were the most selected choices whereas Gaming, Ad-Tech,
and Clean-Tech were the least selected choices among all investor groups. We were surprised that almost all
cohorts of investors, accredited individual vs. institutional or public equity vs. VC/PE investors, seem to generally
prefer long-term growth opportunity in Enterprise Software companies versus Consumer Mobile or Web Internet
companies, particularly given 3 out of 5 most valuable public companies today are in the latter group (GOOGL,
AMZN, FB) versus just one in the first group (MSFT).

Exhibit 11: Regardless of investment time horizons, where do you see greatest growth opportunity in the future?

About 37% of all surveyed investors think that investing in late-stage private tech companies via secondary shares
is an attractive investment strategy. This compares to 23% of surveyed respondents who indicated that secondary
shares do not present an attractive investment opportunity. Both private equity and accredited individual investors
think positively about investing in this asset class. But, a marginally higher proportion of public equity-focused
institutional investors are negatively biased towards this asset class. 35% of public equity investors think that this
asset class is not an attractive investment opportunity. This proportion is marginally higher than the 33% of public
equity investors who think that secondary share investing is an attractive investment.

Exhibit 14: How do you view secondary shares of late-stage VC-backed tech companies as an asset class?

#6. Investors expect public markets to continue to rally in 2017

57% of investors surveyed believe the S&P 500 would rise by 5% or more over the next 12 months. On the other
hand, 17% of survey respondents believe the S&P 500 would decrease by 5% or more during 2017. For context,
prior 5-year market returns have been 2.1% in 2011, 16% in 2012, 32.4% in 2013, 13.7% in 2014, and 1.4% in 2015.
Through Dec 15 2016, the S&P 500 is up approximately 10%.

Institutional investors are marginally more bullish about public markets than individual investors. 64% of
surveyed institutional investors are bullish whereas 53% of accredited individual investors expect public markets
to rise 5% or more. This level of optimism largely ties in the most recent investor sentiment conducted by American
Association Of Individual Investors (AAII) that reported which 43% of the surveyed individual investors felt bullish
versus 28% feeling bearish in early December.

Public equity investors are marginally more bullish about public markets than VC/PE investors. 69% of
surveyed public equity investors are bullish whereas 60% of private equity institutional investors expect public
markets to rise 5% or more. On the other hand, roughly 12-13% of public equity investors expect public markets to
decline 5% or more during 2017.

Exhibit 17: The S&P 500 is up roughly 8% so far in 2016. Where do you expect the S&P 500 to be in the next 12 months?

PLEASE READ THESE IMPORTANT LEGAL NOTICES & DISCLOSURES

This article does not constitute an offer to provide investment advice or service. Registered representatives of SharesPost Financial Corporation do not (1) advise any member on the merits or prudence of a particular investment or transaction, or (2) assist in the determination of fair value of any security or investment, or (3) provide legal, tax, or transactional advisory services.

Securities referenced in this article may be offered by SharesPost Financial Corporation, member FINRA/SIPC. SharesPost Financial Corporation and SP Investments Management are wholly owned subsidiaries of SharesPost, Inc. Certain affiliates of these entities may act as principals in such transactions.

Investing in private company securities is not suitable for all investors. An investment in private company securities is highly speculative, involving a high degree of risk, and investors should be prepared to withstand a total loss of your investment. Private company securities are also highly illiquid and there is no guarantee that a market will develop for such securities. Each investment also carries its own specific risks and investors should conduct their own, independent due diligence regarding the investment, including obtaining additional information about the company, opinions, financial projections and legal or investment advice.

Accordingly, investing in private company securities is appropriate only for those investors who can tolerate a high degree of risk and do not require a liquid investment.

SharesPost, the SharesPost logo, My SharesPost, the SharesPost Index, and SharesPost Investment Management are all registered trademarks of SharesPost, Inc. All other trademarks are the property of their respective owners.

PLEASE READ THESE IMPORTANT LEGAL NOTICES & DISCLOSURES

This article does not constitute an offer to provide investment advice or service. Registered representatives of SharesPost Financial Corporation do not (1) advise any member on the merits or prudence of a particular investment or transaction, or (2) assist in the determination of fair value of any security or investment, or (3) provide legal, tax, or transactional advisory services.

Securities referenced in this article may be offered by SharesPost Financial Corporation, member FINRA/SIPC. SharesPost Financial Corporation and SP Investments Management are wholly owned subsidiaries of SharesPost, Inc. Certain affiliates of these entities may act as principals in such transactions.

Investing in private company securities is not suitable for all investors. An investment in private company securities is highly speculative, involving a high degree of risk, and investors should be prepared to withstand a total loss of your investment. Private company securities are also highly illiquid and there is no guarantee that a market will develop for such securities. Each investment also carries its own specific risks and investors should conduct their own, independent due diligence regarding the investment, including obtaining additional information about the company, opinions, financial projections and legal or investment advice.

Accordingly, investing in private company securities is appropriate only for those investors who can tolerate a high degree of risk and do not require a liquid investment.

SharesPost, the SharesPost logo, My SharesPost, the SharesPost Index, and SharesPost Investment Management are all registered trademarks of SharesPost, Inc. All other trademarks are the property of their respective owners.